20100126e by liaoxiuli1

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									                      Bauhinia Summit on
            “Creating a World Class PRD Metropolis”
              cum The Second Pearl River Forum

Financial Infrastructure for Metropolitan Living Area:
       e-money for Cross-Border Payments

                         Mr Norman T.L. Chan
            Chief Executive, Hong Kong Monetary Authority

                          26 January 2010
Pearl River Delta (PRD) Metropolis
                 9 Cities and
                  2 Special
            Administrative Regions




                                Area                55,800 km2
                                Resident
                                                    55.28 mn
                                Population
                                GDP                 USD 673.2 bn
                                GDP per
                                                    USD 12,178
                                capita



           Sources: Guangdong Yearbook, Hong Kong Yearbook, Macao Statistics and   2
                                   Census Service, Macao Yearbook; 2008 figures.
                       World Class Metropolises

The London
 Metropolis
                                    The Tokyo
                                     Metropolis

                                                                  The New York
                                                                    Metropolis
                                                                  New York City+Northern New
                                                                    Jersey+Long Island
                                                                    +Southwestern Connecticut
 City of London+11 Neighbouring                                   Area: 33,483 sq. km.
   Counties                                                       Resident population: 28.71 mn
 Area: 11,427 sq. km.             Tokyo+Kanagawa+Saitama+Chiba    GDP: USD 1,614.2 bn
 Resident population: 14.6 mn     Area: 13,508 sq. km.            GDP per capita: USD 56,227
 GDP: USD 677.7 bn                Resident population: 32.56 mn
 GDP per capita: USD 46,418       GDP: USD 1,655.6 bn
                                                                                           3
Sources: Bauhinia Foundation      GDP per capita: USD 50,849
Research Centre; 2007 figures.
  What is a World Class Metropolis
1. A cluster of vibrant and mutually interactive cities
   capable of achieving synergy
2. Smooth flow of factors of production - goods, talents,
   capital and information
3. Sharing a common living area

            Challenge for the PRD region and Hong Kong - to
              develop a closely linked and highly interactive
           metropolitan living area within the framework of “One
                           Country, Two Systems”




                                                                   4
         Payment for Spending
   within the Metropolitan Living Area
Methods of Payment

Large Value   banknotes, remittances, cheques,
              credit cards, debit cards

              banknotes, coins, credit cards,
Small Value   debit cards, electronic money




                                                 5
         One Country, Two Systems;
        One Country, Two Currencies
     Cross-Border Small-Value Payments
      within the Metropolitan Living Area
• Banknotes and coins are very inconvenient for
  cross-border purchases
• Credit or debit cards are inefficient payment means
  for small-value purchases
• The use of e-money is convenient for people within
  the metropolitan living area in making cross-border
  payments
• Mutual use and access of e-money is an important
  financial infrastructure

                                                        6
           Small-Value Payments Means
                  in Hong Kong
                                   Convenience
                       Security                       Public      Coverage
                                     (Storage/
                                                    Acceptance
                                  Giving changes)


Coins                    1             5               1            1

                         1             4               1            1
Small-denomination
notes

Credit/debit cards
                         3             3               3            4
 An ideal electronic
   money system          1             1               1            1

                                                       “1” : best, “5” : worst

                                                                                 7
          Overview of e-Money in Hong Kong
 Currently
 there are over
 20 million
 Octopus
 cards in
 circulation

                     No. of daily
                     transactions
                     processed
                     exceeds 10
                     mn


Launched in 1997,
Octopus card                          Value of daily
system became                         transactions
the e-payment                         exceeds HK$90
system for public                     mn
transport
                    Scope of                           Average value of
                    service has                        transaction is
                    steadily                           HK$9 (public
                    expanded to                        transport: HK$7;
                                                       retail spending:   Avg daily transaction value (HK$10Mn) (left axis)
                    small-value
                    retail payments                    HK$22)             Avg daily no of transaction (Mn) (right axis)


                                                                                     Source: Octopus Cards Ltd.               8
        Overview of e-Money in Hong Kong
                                           The Octopus card is extensively used in Hong Kong,
                                           with approximately 56,000 readers covering 3,000
                                           service providers across different businesses, including
                                           public transport and retail shops (e.g. convenience
                                           stores, fast food outlets, carparks and vending
                                           machines).


                           2002                                        2009



    HK$1.1bn

                               HK$18.2bn                  HK$12.8bn
                                                                            HK$22.8bn




sport
s                                                                                                      9
  Source: Octopus Cards Ltd.
                 Transport                              (Outstanding store value: HK$1 billion)
                                                                                                      Non-
Comparing Small-Value Payment Tools
           in Hong Kong
                                   Convenience        Public       Coverage
                       Security      (Storage/      acceptance
                                  Giving changes)


 Coins                    1             5               1             1
 Small-denomination
 notes                    1             4               1             1

 Credit/debit cards       3             3               3             4
 An ideal electronic
 money system             1             1               1             1

                          1             1               1             3

                                                      “1”: best, “5”: worst
                                                                              10
   HKMA’s Policy Initiatives in the
Development of e-Money in Hong Kong
               Support Octopus’s expansion of retail payment network,
   Promote     facilitating it to become a form of e-money in Hong Kong
 Development


               •   Octopus has 3 roles: settlement platform operator; card issuer;
                   merchant acquirer
  Introduce    •   Access to settlement platform made available to other card
 Competition       issuing banks; currently there are 2 Hong Kong banks which
                   issue bank cards with Octopus function
               •   Open up merchant acquiring business: in addition to Octopus
                   Cards Ltd, there are currently 12 merchant acquirers


   Prudent
               Ensure the Octopus electronic settlement platform
  Oversight
               operates safely and efficiently


                                                                               11
Cross-Border Usage of
Hong Kong’s e-Money
           Very limited usage of Octopus across
           the border
           Accepted only at 11 fast food outlets in Shenzhen
           and 4 duty free shops in Lowu and Huanggang
           control points.




Shenzhen




                           Hong Kong


                                                               12
                Interaction between Residents
               in Hong Kong and the Mainland

                                                     2008                      No. of Visitors       Tourist Spending


                                                     Hong Kong
                                                     residents visiting           7.84 mn              HKD 718 bn
                                                     Mainland

                                                     Mainland residents
                                                                                 16.86 mn              HKD 692 bn
                                                     visiting Hong Kong


                                                     Total                        24.7 mn             HKD 1,410 bn

 No. of visitors between HK & the Mainland (mn)
18
16
14
12
10
                                       Sources: National Tourism Administration of PRC ; Hong Kong Tourism Board.
 8
 6                                                                                                                  13
                Current Status of
     Electronic Stored Value Cards in PRD
                                                 Dongguan
                   Guangzhou               Public Transport   Huizhou Public
                  Yang Cheng                        IC Card   Transport Card
                        Tong

                                                                               Shenzhen
       Foshan Tong /
                                                                                   Tong
      Guang Fo Tong



          Guangshen
         Railway Card                                                    MacauPass


                                      Jiangmen Public
                                        Transport Card                Zhongshan
          Guangshen Railway                                      Public Transport
              Mudan IC Card
                                  Zhuhai Public                           IC Card
                                 Transport Card

•   Mainly used in public transport with limited application in retail payments
•   Different technology platforms and modes of operation, offering limited
    mutual access and usage                                                           14
Strategy for Long-Term Development
 •   Development, mutual access and usage of e-money in the PRD
     region and Hong Kong should facilitate the need for small-value
     payments within the PRD metropolitan living area


                                                   PRD
                                E-money
                            in the Mainland
                          (e.g. Shenzhen Tong,
                                Bank Card)




                               E-money in
                                Hong Kong
                           (e.g. Octopus Card)
           HK

                                                                       15
Pilot Scheme in Shenzhen and Hong Kong

                   Two feasible proposals:

      Proposal 1



                            Proposal 2
            “Two-in-One
               Card”
                                  Common Card
                                    Reader




                                                16
        Proposal 1 – “Two-in-One Card”

                              Shenzhen
                              One card embedded with
                                     two chips




                          Hong Kong
• To develop a card with chips for both Shenzhen Tong and Octopus so that
  cardholders can pay for services and purchases conveniently and efficiently in
  the two places
• “Two-in-One Card” is technically simple but needs to issue new cards and
  tackle value upload involving different currencies across the border
                                                                                   17
Proposal 2 – Common Card Reader
                Shops
                           Shenzhen
                                                         Bank
                                                         Card
                              Common card
                              reader for:

                              -Shenzhen Tong
                              -Octopus
                              -Bank Card        Shops
         Bank
         Card
                          Hong Kong
• To jointly develop a common card reader for the e-money in Shenzhen
  and Hong Kong (e.g. Shenzhen Tong, Bank Card and Octopus) to
  achieve mutual access and usage with scale
• Common card reader is not a complicated technology, but involves
  software development and reader replacement, as well as value upload
  involving different currencies across the border                       18
                    Work Target
• It is estimated that the “Two-in-One Card” can initially be
  implemented in Shenzhen and Hong Kong, within one year
• The use of common card reader is a solution that can
  achieve mutual access and usage of e-money with scale.
  As it involves software development and replacing existing
  card readers, more time would be required for
  implementation. Relevant parties in the two cities have
  already started the discussion.
• To further expand the mutual access and usage between
  Shenzhen and Hong Kong to the whole PRD region in the
  long run.


                                                               19
Pearl River Delta (PRD)
Metropolitan Living Area
           9 Cities and
            2 Special
      Administrative Regions




      Complete realization of Mutual
       Use and Access of e-money
                                 20
Thank you!




             21

								
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